Our Recommended Documentation for SBA Payroll Protection Program Loan Forgiveness

Much of the guidance related to the Small Business Administration’s Payroll Protection Program loan forgiveness is unclear at this time; however, we know companies must document qualifying expenses to receive forgiveness. Without proper documentation, there may be challenges for both lenders and companies within the next eight to 10 weeks.

At Henssler Financial, we recommend the following tips for setting up successful documentation.

• Consider opening a separate bank account for the PPP funds.
• Record the loan on your financials.
  • The loan remains a long-term liability until all (or part) of the loan is forgiven.
• Use a simple spreadsheet to track qualifying expenses.
  • This will allow you to see your progress in real-time and project where you will be at the end of the eight-week period, and
  • Be sure to substantiate the amounts listed in your spreadsheet.
• Use third-party documentation.
  • Check with your payroll provider as they may have or are in the process of developing reports for this, and
  • Couple these reports with bank statements reflecting and reconciling the funds coming out of your account.
• Gather and organize your information.
  • Your lender will most likely want you to provide documentation to them, so keep a file dedicated to the PPP loan with all supporting documents.
• Track expenses in the general ledger.
  • You may want to set up an additional class to record the PPP loan expenses.
  • The general ledger could be a good summary for this; although, keep in mind that you will still need the supporting details.
• Payroll Costs
  • Separate employees (including owners taking a salary) who are paid more than $100K annually, or $15,385 during the eight-week period, as qualified gross payroll is limited to that amount per employee.
  • Document other costs under the definition of “payroll costs” (employer contributions to health, dental, vision, HSA, and retirement plans);
  • Collect invoices, statements, payments (electronic or checks) to validate costs;
  • Use Federal Form 940 or 941 to summarize the portion of the amount on the form that was actually paid, and
  • Keep an electronic copy of your bank statement and reconcile the amounts from payroll reports and invoices.
• Other qualifying expenses
  • Use statements, invoices, and payments to validate costs for rent, utilities, and mortgage interest, and
  • Have rent, lease, and mortgage loan agreements available to validate commitments were in place before February 15 in the event you are asked for them.

While lending institutions are generally allowing drawdowns on PPP loans without significant documentation, detailed records will be important to support the loan amount to be forgiven. Keep in regular communication with your lender to be as prepared as possible. Keep the documentation organized electronically in a secure location so you can adapt to your lender’s specific requirements when they are issued. In June or July, your goal should be to have all the documentation at your fingertips to help make it easier for you to substantiate and maximize your loan forgiveness.

If you have questions about documenting your business expenses that could qualify for PPP loan forgiveness, contact the Experts at Henssler Financial:

• • • • Experts Request Form
      • Email: experts@henssler.com
      • Phone: 770-429-9166
      • Join the Conversation in Our Coronavirus Facebook Group

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